EU-India Deal Could Spell Disaster

GENEVA, Dec 15 2011 (IPS) - As the Eighth Ministerial meeting of the World Trade Organisation (WTO) kicked off in Geneva this week, a group of NGOs exposed the devastating potential of a free trade agreement currently being negotiated between the European Union and India. If passed, they say the deal would make a mockery of all WTO rules and regulations. A recent impact assessment on the right to food of the EU-India FTA, researched and compiled by leading advocacy groups including the Delhi-based Third World Network (TWN), the Indian NGO Anthra and Germany charities Misereor, Glopolis and the Heinrich Böll Foundation, concluded that the proposed deal would violate the right to food of a vast segment of the Indian population, particularly those who rely on the poultry and dairy sectors.

Additionally, the zero-tariffs clause of the free trade agreement (FTA) could lacerate the retail sector by stripping small retailers of any protection against corporate giants.

Having sat on the table since 2007, the agreement could be sealed as early as next year, an outcome that many experts see as “disastrous” for the local economy.

“The EU is asking India to cut its tariffs to zero on at least 92 percent of all imports, including industrial and agricultural goods,” Ranja Sengupta, senior researcher at TWN told IPS. “Considering that trade with EU represents 60 percent of India’s total international trade, this would be a disaster, particularly in hitherto protected sectors, like agriculture.”

“Our (impact statement) focuses on the dairy and poultry sectors because they employ a large number of very small farmers, many of them operating in their backyards in order to subsist,” Sengupta explained.

Related IPS Articles

Given that the dairy sector currently provides 90 millions jobs, slashing tariffs will likely result in a repeat performance of the 1999 milk crisis in India, when EU imports of skimmed milk powder rose from 600 to 25,000 tonnes, effectively destroying the country’s “white revolution” for milk self-sufficiency.

Similarly, the pending FTA will flood the market with imports, depress producer prices, reduce incomes and eventually increase debt.

The poultry sector, which consists of 96 million small, landless agricultural households that manage 85 percent of the poultry stock, is currently guarded by a robust ‘100 percent tariff’ that actually prohibits imports.

But the FTA could kill these protections. According to Sengupta, Indians consume more poultry legs than breasts and vice versa in Europe. If the EU dumped its poultry legs on the local market, India would not be able to retaliate by exporting poultry breasts to European markets because of the latter’s strict health and safety standards.

Currently, the WTO advocates lowering tariffs, not removing them altogether. Additionally, the agenda for the ministerial meeting this week includes the question of industrialised countries eliminating government subsidies.

“In sharp contrast, FTAs like the one being negotiated between India and the EU insist on the complete elimination of tariffs but contain no binding clauses about eliminating subsidies,” Sengupta lamented.

Experts are also concerned about the FTA’s impact on the retail sector, the second largest employer in India after agriculture.

In the WTO, services trade liberalisation is a relatively flexible mechanism because it allows countries themselves to decide which sectors to open up to foreign competition.

“But FTAs make very strong demands to liberalise services in high-employment areas like retail,” effectively backing the government into a corner, Sengupta stressed.

Small vendors have already suffered major losses as a result of burgeoning domestic retail chains: 15 percent have seen a decline of their profits against Indian retail stores and 4.2 percent face annual closure if located near bigger retailers.

Additionally, larger retailers exercise a stranglehold over the market and then discreetly increase the prices they had originally kept low to attract consumers.

Still, Indian domestic retailers, which have already lacerated the market for small retailers, do not even hold a candle to multinational behemoths like Tesco or Carrefour, against whom small retailers in India do not stand a fighting chance.

Though India invests 51 percent of the country’s capital in single-brand retail – one company selling a single, branded product – it has not yet allowed foreign direct investment, which would be “suicide” for smaller stores.

Carrefour has promised to create 1.8 millions jobs but the five NGOs who authored the study on the FTA’s impact consider this figure to be unrealistic. Furthermore, 1.8 million new jobs hardly compensates for the estimated loss of 2.9 million to a potentially staggering 6.7 million informal jobs as a direct result of the zero tariffs clause.

“This is a very sensitive issue in the country but unfortunately the public is unaware of the serious impact of the FTA because negotiations are often conducted in secret. Contrary to the WTO, the FTA does not need to be ratified by the national parliament and state governments are not even consulted,” Sengupta told IPS.

The EU-India FTA will also go much further than the WTO in the protection of intellectual property.

The EU is now pressuring India to accede to UPOV 1991 that grants seed breeding companies very strong rights at the expense of farmers, who will no longer be able to exchange, resell and use commercial seeds freely. This is a violation of their right to practise traditional forms of agriculture.

Many advocates are also concerned about the issue of “geographical indications (GIs)”, a scheme that assigns certain products special status – based on their production location – and therefore a market advantage. The EU has established 190 GIs for agricultural products, which it wants India to recognise.

“But India is lagging behind in registering its own GIs, which means that EU products will get additional access to markets in India,” Sengupta told IPS.

Experts believe that if substantial evidence finds the FTA to have potentially adverse consequences for the Indian people, it should be reviewed and renegotiated.

“There is no point in negotiating at the WTO if these FTAs are signed simultaneously,” Sengupta stressed.